The Backlash To Mkhwebane's Finding That Absa Must Pay Back R1,1bn Has Started

She also wants to change the Constitution about South African Reserve Bank's role.

Absa maintains it has no obligation in paying back a controversial R1.1 billion figure that forms part of the public protector's findings on the alleged failure by government to recover apartheid-era funds borrowed from the banking giant.

In a statement on Monday, the bank said after it received a copy of the Public Protector Busisiwe Mkhwebane's report, which was discussed in a press briefing by her office on Monday, it would "consider [its] legal options" that included seeking a High Court review on the matter.

"Absa met all its obligations in respect of the loan provided by the SA Reserve Bank by October 1995. It is our firm position that there is no obligation to pay anything to the SA government", Absa said.

Mkhwebane wants the government to recover more than R1 billion in alleged misappropriated public funds awarded to Absa in a series of apartheid-era bailouts.

She said government and the South African Reserve Bank failed to act on the findings of the Ciex report. It details the findings of a U.K. company which was paid £600,000 to investigate apartheid-era looting and alleged the Sarb illegally handed R24 billion to Bankorp (now part of Absa) between 1985 and 1992 and a further R2,2 billion to Absa in bailouts for three years from 1992.

But Mkhwebane found the figure for the bailouts to be closer to R1.125 billion -- and that's how much she wants the financial institution to pay back.

Changes to Constitution
That was not her only recommendation -- she also wants the Constitution to be amended.

She is recommending that 224.1 of constitution be changed from: "The primary object of the South African Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable economic growth in the Republic" to: "The primary object of the SARB is to promote balanced and sustainable economic growth in the Republic, while ensuring that the socio-economic well-being of the citizens are protected."

Nomura's Peter Attard Montalto said it is "quite unusual" for a public protector to be so specific on changing the Constitution so radically.

"I don't think this is going to happen in the short to medium run. The ANC cannot really muster the support to change the Constitution in Parliament and would require a two-thirds majority. What the worry is here is that it's much easier than that," he said.

"You just need a new Monetary Policy Committee (MPC) mandate which is done by a letter from the Finance Minister to the MPC and can be done technically at any time. I do not think Malusi Gigaba is going to do that, but this raises the risk and promotes the idea in public debate about how secure this last bastion of an institution is."

Montalto said the SARB is one of the few positives for the rating agencies.

"I see the SARB leadership strongly and resolutely defending their independence and existing mandate including via court action if necessary."

Absa's defence
Hours after Mkhwebane's press briefing, Absa released a statement on its website and attached a copy of their response to the public protector's provisional report on the investigation, which was leaked to the media at the beginning of the year.

The bank said it met all its obligations in respect of the loan provided by the SARB by October 1995 and that there is no obligation to pay anything to the South African government.

Absa submitted that the provisional report was "legally and factually flawed and inaccurate" because according to the bank:

No loan was ever provided to Bankorp or Absa at a 16% interest rate.

Absa paid for the SARB loan to Bankorp and did not benefit therefrom.

Absa did not make a provision in its accounts for the repayment of the interest on the SARB loan to Bankorp because no such liability to repay interest existed.

Mkhwebane's provisional report, as well as the initial Ciex report, have both come under fire in the past.

In court papers, former finance minister Pravin Gordhan dismissed the Ciex Report as having "no legal status" and argues the recommended manner in which the funds would have been recouped are "extra-judicial" and does not comply with the law.

Gordhan asserted that government repudiated Ciex and its recommendations and that two properly constituted investigations -- led by Judges Willem Heath and Dennis Davis respectively -- found that it would not be practical or worthwhile to recover funds from Absa.

Also, subsequent to the provisional report being leaked to the public, various parties who were interviewed by the Public Protector made statements in the media refuting the findings contained in the report which were attributed to them.